Highly dependence of Central Asian countries in both political and economic terms puts them in a vulnerable circumstance when it comes to sudden shocks and economic downturns in Russia. Based on the Russian government figures, more than 7.8 million migrants were registered in the year 2021 which were mainly coming from Tajikistan, Kyrgyzstan and Uzbekistan [1]. Most of these Central Asian migrants indicated work as their main purpose of travel to Russia. This implies that in addition to close trade ties with Russia, Central Asian countries are also highly reliant on the remittances coming from Russia. However, the Russian-Ukraine war and unprecedented Western sanctions forced Russia to an economic isolation that not only affected Russian economy, but also its Asian neighbors.
Rapid depreciation of Russian ruble against US dollar was quickly followed by large depreciation of individual currencies against USD in Central Asian countries. On the one hand, it resulted in receiving less money as remittances and in another hand, it translated into rapid increase in prices. Moreover, as Russia gets sanctioned by most of its trade partners, in the long term most of the Russian funded projects in Central Asia are exposed to suspension which will instead enable others, like China, Turkey and NATO to launch strategic trade roads in the region.
Underdeveloped economic and education system, high unemployment rate, poverty and many more political and economic problems force a large number of the Central Asians to move out of their countries and seek job in other countries. Due to their shared Soviet Union history, shared language and similarity in culture as well as ease in travel permissions most of these migrants are choosing Russia as their work destination. Tajikistan, Kyrgyzstan and Uzbekistan are the most remittance dependent countries in Central Asia. According to the data from the World Bank remittances accounted for 26.68% of the total GDP of Tajikistan in 2020 [2]. Moreover, the number of Tajik migrants to Russia increased in 2021 even more than before. More than 2 million Tajik migrants were registered by Interior Ministry of Russia among which 1.6 million of them indicated work as their primary and official purpose [3]. Same is true for Kyrgyz Republic and Uzbekistan. Based on the recent World Bank data, remittances accounted for 31.3% of the GDP of the Kyrgyz Republic in the year 2020 [4]. Though the statistics on number of Kyrgyz migrants in Russia is not very clear, in 2019 more than 1.55 million Kyrgyz migrants were registered by the Russian Internal Affairs Ministry [5]. Similarly remittances accounted for 11.64% of GDP in 2020 in Uzbekistan. In the year 2021 Uzbekistan [6] had around 4.5 million migrants in Russia [6].
Today landlocked Central Asian region is flanked by sanctioned countries by Western world. Russia has been recently added to the list of these sanctioned nations of Afghanistan, Iran, and to lesser extent China. The region was hardly recovering from the global economic depression due to Covid 19, and later from the US withdrawal from Afghanistan. Right now however, they are struggling with the economic restrictions on Moscow. Sanctions against Russia is subject to weakening the economic activity in Russia, which in turn dampens the overall employment in the country. Even though for these remittance dependent countries, seasonal migration provides a crucial lifeline, migrant workers are the most vulnerable group who are losing jobs due to fewer job opportunities in Russia right now. In addition, the large depreciation of ruble against US dollar results in receiving less money as income for these workers. The decline in remittance is also due to Russian banks’ ban of sending dollars out of the country, which results in the lower value of remittances in rubles or in national currency.
Based on the Dilip Ratha & Eung Ju Kim projection, remittances which is the critical income source for most of these countries is expected to decline by 25% in 2022 [8]. The individual impact of Russian Ukraine war on the remittances received in these countries depends on their dependency on remittances. For instance, despite the original projected growth rate of 3% as a result of Russian Ukraine war the remittances in the Kyrgyz republic is estimated to decrease by 33% in 2022 [9]. Tajikistan and Uzbekistan are also estimated to experience the harsh hit each with 22% and 21% decline in remittances respectively instead of growth [10]. Moreover, this war has greatly affected not only the remittance dependent countries in the region but also the region’s largest economy and energy rich Kazakhstan. Kazakh tenge depreciated as ruble lost its value against US dollar. Kazakhstan’s national Bank is injecting millions of dollars in domestic market each week to ease pressure on tenge, but the inflation is unprecedented [11]. Kazakhstan exports two third of its oil supplies through Russia, but it is now suffering from western sanctions on Russia.
As shown in the below table the Dilip Ratha & Eung Ju Kim analysis indicates that the only country that is likely to have a positive growth in remittances is Ukraine, while all other countries including Central Asian countries are most likely to experience big negative growth in the year 2022.
Table1 [12]: Impact of Russia Ukraine conflict on remittances
Analysis on the long term impact of Russian Ukraine war on Central Asian economies shows that most of the Russian funded projects in the region are exposed to suspension. Ban of exports through Russia to Europe will more likely affect the export of oil and gas if the energy sector also gets hit by sanctions [13]. In terms of Kazakhstan, it is very likely that Russian-Kazakh cooperation projects in the field of digitalization, the development of nuclear energy and in other areas will be cancelled [14]. Likewise, for Tajikistan Russia is a critical partner in trade for this country. Tajikistan and Russia trade turnover amounted to 1.3 billion US dollars which is more in terms of oil products, wood supplies, and metals [15]. If the Russian Ukraine war continues for more than one month most probably Russia will close its borders with Central Asian countries depending on the extent of sanctions and this can hugely hurt the trade relations and economic stability in these countries. Since Tajikistan has relocated its investment partnership towards China, there are not very critical Russian projects in this country that would be hurt. For Kyrgyzstan political scientists are analyzing that Russia will still remain a critical economic and political partner even though the country is hurt to a large extent in terms of remittances and inflation.
Moreover, Russia’s political and economic isolation is a chance for its economic and political rivals to launch strategic economic roads in Central Asia. Among all, China, Turkey and NATO have a high interest of replacing the Russian authority in the region. For instance, China is already emerging as a major arms provider and strategic partner with accounting for one third of the overall trade in Central Asia [16]. Holding 40% of national debts of Kyrgyzstan and Tajikistan, China’s power spread would benefit the region to some extent, but not that large to compensate the sudden exit of Russia from the regional market [17]. Meaning that even if China would take power in the region, these countries would still remain dependent on Russia. Thus, based on the place of Russia in the future economic relations with other countries, Central Asian countries would either get more or less hurt because of their high inevitable dependence on Russia.
Note:
[1] Farangis Najibullah, “Central Asia Takes Economic Hit From Russian War In Ukraine Sooner Than Expected,” Radio Free Europe, March, 01, 2022. https://www.rferl.org/a/central-asia-migrants-ruble-impact/31730968.html
[2] “Personal Remittances, received (%GDP)-Tajikistan,” The World Bank, https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=TJ
[3] Kamila Ibragimova, “Tajik Labor migration to Russia hits historic, Officially,” Nov 2/ 2021 Eurasianet. https://eurasianet.org/tajik-labor-migration-to-russia-hits-historic-high-officially
[4] “Personal Remittances, received (% of GDP)- Kyrgyz Republic,” The World Bank, https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=KG
[5] Aziz Shamybekova, “Has Labor Migration to Russia Improved for Kyrgyz?” The Diplomat December, 01, 2021. https://thediplomat.com/2021/12/has-labor-migration-to-russia-improved-for-kyrgyz/
[6] “Personal remittances, received (% of GDP)- Uzbekistan,” The World Bank, https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=UZ
[7] Farangis Najibullah, “Central Asia Takes Economic Hit From Russian War in Ukraine Sooner Than Expected,” Radio Free Europe March 01, 2022, https://www.rferl.org/a/central-asia-migrants-ruble-impact/31730968.html#:~:text=According%20to%20Russian%20government%20figures,reason%20for%20entering%20the%20country.
[8] Dilip Ratha & Eung Ju Kim, “Russia- Ukraine Conflict: Implications for Remittance flows to Ukraine and Central Asia,” World Bank Blogs, March 04, 2022. https://blogs.worldbank.org/peoplemove/russia-ukraine-conflict-implications-remittance-flows-ukraine-and-central-asia
[9] Ibid.
[10] Ibid.
[11] Farangis Najibullah, “Central Asia Takes Economic Hit From Russian War in Ukraine Sooner Than Expected,” Radio Free Europe March 01, 2022, https://www.rferl.org/a/central-asia-migrants-ruble-impact/31730968.html#:~:text=According%20to%20Russian%20government%20figures,reason%20for%20entering%20the%20country.
[12] Dilip Ratha & Eung Ju Kim, “Russia- Ukraine Conflict: Implications for Remittance flows to Ukraine and Central Asia,” World Bank Blogs, March 04, 2022. https://blogs.worldbank.org/peoplemove/russia-ukraine-conflict-implications-remittance-flows-ukraine-and-central-asia
[13] Gavin Helf, “With Friends Like these: How Russia’s Invasion of Ukraine Hurts Central Asia,” The United States Institute of Peace, February, 28, 2022. https://www.usip.org/publications/2022/02/friends-these-how-russias-invasion-ukraine-hurts-central-asia
[14] “ Ukraine: Impact of War on Central Asia,” Institute for war and peace reporting, March 01, 2022. https://iwpr.net/global-voices/ukraine-impact-war-central-asia
[15] Ibid.
[16] Bradely Jardine, “Russia’s War in Ukraine Spells Disaster for Neighboring Central Asia,” Time, March 10, 2022. https://time.com/6156524/russia-ukraine-central-asia-impact/
[17] Ibid.
Reference:
Helf, Gavin. “With Friends Like these: How Russia’s Invasion of Ukraine Hurts Central Asia.” The United States
Institute of Peace. February, 28, 2022. https://www.usip.org/publications/2022/02/friends-these-how-russias-invasion-ukraine-hurts-central-asia
Ibragimova, Kamila. “Tjik Labor migration to Russia hits historic, Officially.” November, 02, 2021 Eurasianet.
https://eurasianet.org/tajik-labor-migration-to-russia-hits-historic-high-officially
Jardine, Bradely. “Russia’s War in Ukraine Spells Disaster for Neighboring Central Asia.” Time. March 10, 2022.
https://time.com/6156524/russia-ukraine-central-asia-impact/
Najibullah, Farangis. “Central Asia Takes Economic Hit From Russian War In Ukraine Sooner Than Expected.”
Radio Free Europe, March, 01, 2022. https://www.rferl.org/a/central-asia-migrants-ruble-impact/31730968.html
“Personal Remittances, received (%GDP)-Tajikistan.” The World Bank.
https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=TJ
“Personal Remittances, received (% of GDp)- Kyrgyz Republic.” The World Bank.
https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=KG
“Personal remittances, received (% of GDP)- Uzbekistan,” The World Bank.
https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS?locations=UZ
Ratha, Dilip & Kim, Eung Ju. “Russia- Ukraine Conflict: Implications for Remittance flows to Ukraine and Central
Asia.” World Bank Blogs. March, 04, 2022. https://blogs.worldbank.org/peoplemove/russia-ukraine-conflict-implications-remittance-flows-ukraine-and-central-asia
Shamybekova, Aziz. “Has Labor Migration to Russia Improved for Kyrgyz?” The Diplomat, December, 01, 2021.
https://thediplomat.com/2021/12/has-labor-migration-to-russia-improved-for-kyrgyz/
“ Ukraine: Impact of War on Central Asia.” Institute for war and peace reporting. March 01, 2022.
https://iwpr.net/global-voices/ukraine-impact-war-central-asia
